Price fixing for profit

Gazprom a major Russian energy corp is looking to finalize a 30 year gas contract with China that entitles  it to buy one billion cubic meters of Russian gas a year.China is looking to buy gas cheaper than other countries that Gazprom sells to since it offers an entrance into the Asian markets. Furthermore, Gazprom would be willing to sell gas at a lower price because the demand has fallen in europe while China is quickly becoming one of the world biggest consumers. Export of the Russian Gas to Chinese soil will begin in 2015 once the deal is finalized.

I'm glad to see how a company like Gazprom is taking advantage of a new market by offering lower prices to gain access. Once this deal is finalized the amount of Russian gas that China will consume will be higher of than those of Gazprom's other markets, so instead of selling gas at a higher price to fewer consumers they are selling at a lower price to a much wider consumer range. I think this move is one that is necessary for businesses of this magnitude to develop and continue to make profit. China will soon come to par with the United States in gas and energy consumption and Gazprom will be there to supply its energy needs.

-Jaisukh Samaha

http://online.wsj.com/article/SB10001424052748704116004575521433569135028.html?mod=WSJ_Energy_leftHeadlines

Tehran Touts Its Exports of Gasoline

On Tuesday Iran said that they were starting to export domestically produced oil. This is strange as even though Iran is one of the worlds largest oil producers it has imported about 40% of its oil, because of its lack of refining capabilities, to fuel its country and its nuclear program. This was seen as a week spot to the U.S who tried to put sanctions on it to stop some of the trade in order to slow down the iranian nuclear program. 


Because of these U.S sanctions and the dropping import of gasoline the Iranian government converted two plants into oil refineries and this increased the capabilities of the iranian government to refine crude oil. Ali Ashgar Arshi, the international affairs director at the National Iranian Oil Co. said "Iran has achieved self-sufficiency in production of gasoline." And by exporting oil it is a demonstration to the countries that have put sanctions on Iran by saying that they are now self efficient and stronger. Iranian officials privately acknowledge the sanctions are hurting the country's energy sector.


In my own opinion I believe that this is sort of a kick in the face of the countries which have put sanctions on Iran as they have become even stronger because of it. 


http://online.wsj.com/article/SB10001424052748704791004575520072670809284.html?mod=WSJ_Energy_leftHeadlines


-Ryan Parker 

Importance of a Good Image

According to the article New CEO Shakes Up Management at BP on the Wall Street Journal, BP is administrating several changes with hopes of improving its currently reputation in society. The company is first starting with a change in management where current CEO Tony Hayward, who was the center of all blame and accusation during the oil spill incident, is being replaced by Chief Executive Bob Dudley and the head of the Gulf of Mexico operation during the oil spill is being fired. In addition to a change in management the company, led my Mr. Dudley, is pushing for a new safety division which will be called Safety and Operational Risk function. This newly formed organization will oversee and examine all of BP's domestic or offshore operations. Also as a part of its recovery plan BP says that it will change its reward strategy within the company; instead of issuing rewards to those that succeed in boosting production or efficiency, Bp will reward those that boost safety of its operations. All of this is being administrated to regain "the trust of [their] customers, of governments, of [their] employees and of the world at large."


BP is going to great measure to regain its former place in society. In the previous unit we learned a lot about business ethics and how a particular business or company can recover from previous unethical conducts. As I was reading this article I realized that BP is following the same plan our text book suggested-things such as changing the face of the companyand administrating a new form of reward system(which will encourage employees to make ethical decisions). For a company being, or at least seeming, ethical means a good public reputation, and good public reputation means better business and ultimately greater profit.

Though I am a bit skeptical about a lot of Bp operations I do believe that the company is taking the right steps to improve its image. Also it is important to note that the newly formed division (Safety and Operational Risk function) will, in addition to bettering BP's reputation, create new jobs opportunities within the company.

http://online.wsj.com/article/SB10001424052748704116004575521394170919842.html?mod=djemalertNEWS

Important Jobs in Energy Industry

According to a Wall Street Journal article, one of the innovations that seems eligible for an award in the next few years or decade is that of finding new fuel technologies. In the energy industry, one of the main issues is the horror of oil running out. The fear of this natural resource becoming obsolete is a very real problem. The new trend in energy is the push for alternative energies or better technology to make existing ideas for energy happen. As the article explains, some companies such as Sun Catalytix Corp. and Amyris Inc. have developed quite unique sources of energy and the young men and women who could take those ideas to the next level or help in creating the technology to make those energy resources accessible are a new asset to companies. I expect that jobs in research and development are increasing as companies fight for the title of the most innovative and powerful company in energy. New college students or grad students who have spent time on new energies and understand more about the science behind the machines needed to produce new energy forms are an asset to companies now.
I believe that the largest issue that is preventing corporations from breaking into new energy sources is technology. Nuclear energy has been known about for quite some time but the technology to properly store the waste is preventing many nations, such as the United States, from switching over to it, although parts of Europe are already ahead of us in nuclear energy. This is the same issue with other ideas, with more backing from having the proper technology then people might have more faith in new energy. Jobs for engineers and researchers are a major aspect of the energy industry as companies need to keep up with new and more productive technology and practices.

- Caitlin McGonnigal

NOC's are becoming more international

According to a document, Oil & Gas Industry Consulting many National oil companies (NOC) are expanding and maturing into multinational oil companies (MNOC). These companies that were once confined or limited by state or national borders are no longer operating solely in the domestic market-they have become multinational. Though they continue to be linked to “sovereign” states, they are no longer forced to stay within that border. If you think about it, they are looking and sounding more like International Oil companies (IOC). This of course is causing alarm and great concern from the IOC who now has to face greater competition. NOC (or MNOC) were motivated to expand or “mature” because of the change in the market. They no longer wanted to be dependent on domestic business- whose demand for oil is continually lowering. Conversely, according to this document, “global oil consumption has increased by 30% and by 50% outside of the OPEC.” The increase in oil consumption is attributed to the high economic development in the region (which corresponds to greater energy needs).
Also, in past years IOC’s had advantages that NOC’s did not have, such as global access, access to capital (NOC were state backed),innovative technology(NOCs had standard technologies), and global partnership(NOC had only local partnership) but no all is changing. The distinction between IOC and NOC is becoming blurred. NOC is gaining increasing access to capital, is developing alliances, and is continually upgrade from standard technologies.
Distinctions between the two forms of oil companies are becoming more unnoticeable. As this happens IOC will undoubtedly face greater competition and will need to work even harder to maintain its standing.
Although this document did not provide specific examples it shows us a trend that I think is very important in the Energy(oil and gas) industry.

http://www.bain.com/bainweb/PDFs/cms/Public/INDUSTRY_BRIEF_Multinational_NOCs.pdf

~Mimi Tekeste

Fuel Pellets

American Pellet Supply is a company based out of Indiana that opened in 2008, its primary purpose as an energy company is to become a major supplier of fuel pellets. Fuel pellets are a green alternative used to heat homes and according to this press release more than 50% of European house holds and businesses use them. Only in the last few years fuel pellet use has doubled within the United States. With American Pellet supply becoming one of the first to enter this niche market it will have a strong hold on what is predicted to be a billion dollar energy sector in the next 10 years. With this company being based in Indiana many investors are hopeful it will become a major manufacturing center and a leader in alternative energy resources. The norm for household and business heating is changing and A.P.S will more than likely be at the forefront of this “green” change.

- Jaisukh Samaha

http://www.insideindianabusiness.com/newsitem.asp?ID=43362

Quantum Energy to Form New Company

The  firm Quantum Energy Partners launched a new company in order to purchase certain American power plants to get into a long term. In order to launch this company Quantum Energy Partners are putting almost a billion dollars for start up prices and purchasing power plants. 

This new company will be entering a strong market for power plant asset deal. This is because many sellers are trying to get out of the industry and selling plant for cheap while many buys are looking to pick up these cheaply sold utilities. In this particular case Quantum Energy wants to focus much more on the long term rather than the short term. A quote from their new president Mr. Kellerman shows this " "It is the right assets, in the right locations linked in with the right utility market where we can find undervalued generation that truly makes sense as a long-term resource." Quantum Energy wishes to get into natural gas, wind power, and solar power technologies because they believe that these are the new up incoming products this will be demanded highly in the future and Quantum Energy wants take advantage of this. 

In my opinion I think that this new company in the market will add competition and possibly make it possible to buy cheaper solar and wind power because more companies will be competeing for customers. Overall this will create a more competitive market which is better for the economy and the consumers. 

http://online.wsj.com/article/SB10001424052748704129204575506000363635496.html?mod=WSJ_Energy_leftHeadlines

Ryan Parker 

DONG Energy in Denmark

The DONG Energy A/S company is Denmark’s leading energy company. It was formerly only involved in oil and natural gas, but in the 2000s, it expanded to include the electricity market. DONG acquired electrical power producers Elsam and Energi E2 and utility companies NESA, Københavns Energi and Frederiksberg Forsyning. This merger was approved by the EU in 2006. Being Denmark’s largest energy company, it must have a great deal of effect on the oil and energy market in Denmark, and have most of the control over prices. Also, Sweden, Germany, The Netherlands, and other markets that it involves itself in must also feel the effects of Denmark’s largest company. According to Companies and Markets, it is also involved in heat and the operation of power plants. It is also involved in the generation of heat and other energy by harnessing wind. The company still remains involved in natural gas and oil as well as crude oil. It maintains 75 natural gas and oil exploration licenses and production assets, and it is said to have over a million customers (http://www.companiesandmarkets.com/Summary-Company-Profile/dong-energy-a-s-strategic-analysis-review-312321.asp?prk=f9ec5118565014b93b58133bb09a32b5).
In my opinion, the fact that DONG Energy A/S is so involved with different energy resources makes it a fierce competitor. It seems to be dappling in many of Denmark and other countries’ basic energy needs, so it is hard to find something that DONG is not involved with in that region. Other companies in the region may be struggling to keep up with DONG simply because it is involved in so many areas of energy.

- Caitlin McGonnigal

Oil industry had become complacent

Tony Hayward soon to be ex-ceo of BP sat before British parliament today, and was quizzed on the companies past safety record relating the Gulf spill to events such as a an explosion in a Texas refinery that killed 15 people in 2005. He claims that the oil industry had become complacent in their practices and procedures due to a 20 year period without a major incident. He also claims that no once company could have been prepared to deal with a 5,000 foot deep underwater explosion. The fact that companies were willing to bear such risk in order to gain high profit is understandable, but the mere fact that the entire industry was complacent for that period of time astounds me. I hope that other companies in the energy field will look at this ethical issue of profit vs risk and learn from Bp's mistakes. It is now a real danger that other disasters of this scale could occur and all companies should have the resources set aside.
-Jaisukh Samaha


http://online.wsj.com/article/SB10001424052748703743504575493701684202916.html?mod=WSJ_Energy_leftHeadlines

Offshore-Drilling Regulations Snagged by Climate Fight

According to the Wall Street Journal the Obama ministrations attempt to regulate offshore drilling after the oil spill in the gulf might be side tracked due to new problems involving climate change policy and monetary issues. The vote on whither or not to fund offshore drilling regulations and the operations of the environmental protection agency was canceled after the committee realized that they needed more time to look over the budget increase from 184 to 250 million dollars. Also along with this some democrats have asked for the EPA to take a break in regulating greenhouse gases as they feel that this will help the economy and unemployment. Many people believe that if they do not get the money needed the job will not be done effectively enough. A company called mineral management service has also been attacked here because they only had 55 inspectors for 3000 oil and gas facilities. The company said that they will have new regulations coming out soon.
In my own personal opinion the new budget increase will be needed in order to regulate offshore drilling properly. This is a necessity as regulations are needed to prevent more oil rig disasters. This shows good ethics on the part of the Obama administration and on the part of mineral management service. Overall i feel this increase must happen and that regulations must be implemented in order to prevent another disaster.            
-Ryan Parker

California Gas Line Had Unusual Construction

According to a Wall Street article, California Gas Line Had Unusual Construction, a natural gas pipeline, owned by PG&E Corporation, exploded in San Bruno on Thursday September, 9, 2010. This disaster took the lives of more than four individuals and destroyed 58 homes. Though the cause of the explosion is not yet verified, many believe that it may be attributed to the configuration of the pipeline. The pipeline contained numerous welds which NTSB Vice Chairman, Christopher Hart, believes “could have weakened the pipe” thus making it more susceptible to rupture. It could also be attributed to the manual shutoff valves, despite the recommendation of many researchers to install automatic shutoff valves. Automatic shutoff valves would have stopped the continual flow of gas thus preventing gas from further fueling the fire.

Federal investigators continue to investigate for other factors such as, pre-existing leaks-as claimed by the members of the community, heavy excavation done in the vicinity, and the kind of affect having too much welds could have on the strength of the gas pipeline.

PG&E, who supplies gas and electricity to millions of families in California, may be put into a tight situation due to this explosion. The unusual configuration of the pipelines, PG&E’s refusal to report dates of last inspection or last repairment, and their lack of action when some members of the community placed complaints of a possible gas leak before the explosion, is unethical and may as a result cause PG&E their reputation.

~Mimi Tekeste

http://online.wsj.com/article/SB10001424052748704644404575482634243573338.html?mod=djemalertNEWS

Drilling Regulations Halt in U.S.

This article from the Wall Street Journal discusses the new ideas being brought up in the U.S. government to better regulate off-shore drilling. These regulations would be in response to the BP PLC oil spill that affected the face of the industry overwhelmingly. Michael Bromwich, the head of the agency that regulates off-shore drilling, states that the industry has already made changes to its regulations and has responded to the spills. Although it is uncertain whether the government will step in with new regulation due to political schemes and issues with the economy, Mr. Bromwich claims that the agency is planning to create new regulations by the end of this month.
I believe that off-shore drilling should be restructured and regulated more, to prevent the types of issues that caused the BP oil spill. Regulation can help make the drilling practices safer and business techniques more structured so issues like this don’t happen again. After the BP oil spill, the conversation has risen over how BP dealt with their technical issues and how they dealtt, or if they dealt, with the spill after it happened. Other companies should be looking to increase their regulations just as BP is attempting to do, in order to appear ethically sound. The oil industry is losing its reputation politically and in people's minds, and only agreeing to greater regulation and implementing this regulation will people put more trust in the industry.

- Caitlin McGonnigal
http://online.wsj.com/article/SB10001424052748704285104575492301373764356.html?mod=djkeyword

Steps to prevent future oil spills

BP has released a 200 page report on what could have lead to the explosion of the underwater well and with it 25 recommendations for preventing future crisis. Most of these recommendations involve technical support and better maintenance of oil rigs. As lawmakers continue to overview offshore drilling standards its important to note that regulation will be the key to preventing a future disaster whether it be an oil spill or explosion. Regulation of building companies,personnel and company policies will be most vital aspect of future control.This article coincides with my first blog post on the importance of creating a new standard for equipment thats durable and also creating departments within global energy corporations  solely geared to emergency response and clean up.- Jaisukh

http://online.wsj.com/article/SB10001424052748703453804575479752398200726.html?mod=WSJ_Energy_leftHeadlines

China's Tighter Regulation Affecting Natural Gas

This Wall Street Journal article explains the new threat of greater regulation on natural gas companies operating in their country. The regulations have started in Hebei and may spread throughout the rest of the nation, or elsewhere. The switch to natural gas is one that the Chinese government has been attempting to achieve with as little problems as possible. The article states that Beijing wants to increase its now 4% use of natural gas to 10% by 2020. Natural gas companies, such as ENN Energy Holdings Ltd. and China Resource Gas Group Ltd., are seeing increases in their stocks, up 74% and 53% respectively. Part of the increasing wealth in the natural gas market is the increased use of natural gas, but it is also partially due to the higher prices the companies are using. These higher gas prices are inhibiting the nation’s switch to natural gas, as they want consumers to be able to purchase natural gas in their own homes and social stability.




China’s eagerness to switch over to natural gas has been initiated partially due to the fact that they now hold the title as the world’s biggest user of energy. They want to decrease pollution, improve efficiency, and most likely prove to be more innovative than other nations. Should other nations pay attention to how the Chinese government is using regulation in order to make a switch of energy? It is an interesting approach, instead of simply demanding or encouraging natural gas use, they just make it more appealing to consumers by keeping a check on the pricing. The switch to natural gas energy could easily sweep the globe, and it will be important to notice how countries are accomplishing this task. While these regulations may hurt the natural gas energy companies right now, the benefit of encouraging a switch to natural gas will help them overall.
 
http://online.wsj.com/article/SB10001424052748703713504575476740661162412.html?mod=WSJ_Energy_leftHeadlines
 
- Caitlin McGonnigal

Chevron to Explore for Oil off Liberia

In response to Mimi's article about offshore drilling in China by the Chevron corporation, Chevron is also beginning to explore for oil in deep water of the shore of Liberia. This deal will grant the Chevron corporation 3,700 square miles of offshore drilling and will also hold 70% interest in concessions. This is actually a very interesting endeavor as the nation of Liberia has yet to produce crude oil and this is also the first time that a large integrated oil company has ever gotten involved with Liberia, as this country is still healing with from its years of civil war and political unrest. Many people including myself believe that if oil is discovered there than this is what Liberia needs to get off its feet, rebuild its nation, and than possibly put it in the status of the up and coming African nations. Even if oil is not found, however, this involvement by Chevron will still help to boost the economy of this small nation. This deal is good for Liberia but it is great for Chevron as well as it is a country still open to foreign investment, has a high possibility of producing large amount of crude oil, and Chevron could have a monopoly on this nation easily.

In my own personal opinion this is great for both the corporation and for Liberia. It will strengthen a nation while at the same time strengthening a cooperation. This deal will be one of the best that Chevron has made in quite a while as it is rare to find an amount of pay this large now and days. Overall I fell this deal will help everyone involved and is a great endeavor.

Ryan Parker

http://online.wsj.com/article/SB10001424052748703453804575479981224884048.html?mod=WSJ_Energy_leftHeadlines     
 

Chevron, Devon in Deal

The need for oil as an energy source continues to grow daily; to satisfy this need or appetite, large oil companies such as Chevron and BP are becoming increasingly reliant on offshore drilling. According to this article Chevron is seeking offshore drilling in South China Sea, a body of water located about 150 miles from Hong Kong. This body of water was abandoned for many years until June 2006 when Husky Energy, an oil company in Canada, discovered about four to six trillion cubic feet of attainable gas beneath the surface (equivalent to 22 billion barrels of oil). In addition to Chevron, BP was also given approval by the Chinese government to take part in the offshore drilling, despite the huge oil spill in the Gulf of Mexico. In this project Chevron will act as an operator, taking the majority stake in the block, and BP will take the remaining. These companies are also required to sign production sharing contracts with Cnooc(China National Offshore Oil Corp ) that says that China has the right to take a majority interest for any amount of oil or gas that is discovered by Chevron. According to the article Devon, a North American oil company, sold its assets (24.5% interest) in the South China Sea for about 515 million dollars. As companies such as Chevron and BP move even deeper in offshore drilling Devon reverts back to domestic drilling.

        I find it very interesting how companies such as BP and chevron are free to participate in offshore drilling after the accidents that took place in the Gulf of Mexico. I think it would be better if oil companies follow Devon in moving toward domestic drilling.

~Mimi Tekeste

http://online.wsj.com/article/SB10001424052748704358904575477250932405706.html?mod=WSJ_Energy_leftHeadlines#articleTabs%3Darticle

Offshore Drilling

According to Blaze Shakes Oil Industry, an accident was reported at 9:00AM today, Thursday September 2, 2010, in the Gulf of Mexico off Louisiana. The cause of this accident is unknown at the time but it is under intensive investigation. Fortunately no casualties were reported and according to the article, only about one gallon of oil was spilled. Although this incident seems minor, it is of great significance due to the previous oil spill in April. It also gives environmentalist groups and politicians, those that are skeptical about offshore drilling, more reasons to push toward a “drilling moratorium”. This incident further proves the Oil industry’s incapability of safely monitoring offshore drilling.
In an attempt to solve this issue or prevent another accident from occurring, The Obama administration is aiming to place stricter regulation on oil industries and cease drilling in waters deeper than 500 feet. Although this may seem like a quick and obvious fix, one must consider those that may lose their jobs as a result.

~Mimi Tekeste
 
http://online.wsj.com/article/SB10001424052748704206804575467600528128386.html?mod=WSJ_hpp_MIDDLETopStories

Crude Oil Situation More Optimistic

http://online.wsj.com/article/SB10001424052748704206804575467272980323924.html?mod=WSJ_Energy_leftHeadlines

This article from the Wall Street Journal explains how the prices for crude-oil has increased, and what this means for the off-shore drilling market in the U.S. Due to globalization and communication with other nations, the United States became more and more tangled in deals for oil in the past. As it became apparent that the U.S. was becoming too dependent on other nations for the resource, one solution was to focus more on our own drilling for oil, especially around the Gulf of Mexico. Crude-oil became one way to ease the pressure caused by our dependence on foreign oil. Some optimism about crude-oil has been found through data research.



Globalization has increased our communication with other nations. As the world became a smaller place, the U.S. struck deals for oil. Through globalization, our country has gained access to oil , making it a staple natural resource for the country. So important in fact, that it is now ruling our foreign relations. Our attachment to oil markets has controlled which nations we try to please, and which we can afford to ignore, based on the threat of losing oil through embargos or other means. Globalization changed the face of our energy resources, and now our need for energy is shaping our global outlook. More and more people agree that our foreign relations should not be totally based on our need for oil. Relations between nations in which we trade heavily with for oil may shift and change now and these nations might push us away entirely after we have detached ourselves somewhat from the oil they have. But what solutions are out there to detach ourselves from foreign oil? After the BP oil spill fiasco, opinions have changed heavily as to how the nation should do this. Crude-oil may be becoming more economically sound though, as the article suggests, but how long can off-shoring continue?

- Caitlin McGonnigal

Greenpeace Ends Greenland Oil Protest

In recent news for our topic on Energy (oil and gas) 4 members of group called Greenpeace tied themselves to the bottom of an oil rig just offshore of the coast of greenland. Greenpeace is a group which is again oil drilling and anything which could hurt the environment like the burning of fossil fuels. These protesters went in because Greenpeace stated that Arctic oil and drilling is unsafe. In result of these protesters the drilling process was halted for about 40 hours. This in turn put them behind schedule in which they will have to catch up. The protesters were removed from the rig only after freezing and windy weather conditions. 


This is just a small showing of how there is a large debate going on around the world whither or not it is right to start offshore drilling and after the BP incident I cant really blame Greenpeace for putting on this display. Personally I support offshore drilling until a new energy source can be found or the existing ones improved on, as we have to start moving away from our dependance on oil. But more domestic oil options is not a bad idea as well until these other options can be found. 

 But what do you think? Should we continue to offshore drill or should we look more into alternative energies more?   


Ryan Parker